COLOMBO: Sri Lankan rupee forwards ended slightly firmer on Wednesday on dollar selling by a foreign bank, but dealers said the currency would face downward pressure due to seasonal demand from importers and after a downgrade by Fitch Ratings.
Fitch on Monday downgraded Sri Lanka's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to B-plus from BB-minus on increasing refinancing risks, significant debt maturities, and weaker public finances.
Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran, however, said the downgrade will not impact the country's borrowing.
"The rupee ended firmer as there was some selling (of dollars). But the pressure is still there," said a currency dealer asking not to be named.
The downgrade will be of concern to international investors and market players, analysts said, adding it would push up the cost of government borrowings in the international markets, adding pressure on the rupee.
One-week rupee forwards, which act as a proxy for the spot currency, ended at 144.75/85 per dollar, firmer from Tuesday's close of 144.85/95. The spot rupee, which hit a record low of 144.65 per dollar when it resumed trading for the first time since Jan. 27 last Friday, did not trade for a third straight session.
It closed at 144.40/70 on Friday. Seasonal import demand is picking up ahead of the local New Year season starting in April, dealers said.
Foreign outflows from government securities also weighed on the currency.
Foreign investors sold 2.5 billion rupees ($17.4 million) worth of government securities in the week ended Feb. 24, data from the central bank showed, taking the total offloaded since Dec. 30 to 34.95 billion rupees. Commercial banks parked 38.465 billion rupees ($266.2 million) of surplus liquidity on Wednesday, using the central bank's deposit facility at 6.50 percent, official data showed.
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